Five Risks Related to Cryptocurrency Investing you Must be Aware Of

Digital currencies attracts more and more attention from investors. They are keen on the young developing financial market, however, potential investors still lack ground knowledge of the field. Before investing your money in crypto, you should consider the many risks associated with virtual coins, payments, and tax implications.

Common Risks

First of all, some cryptos are hard to liquidate, so they can’t be exchanged for fiat money directly. They need to be converted to another token before converted to fiat. This can have a great influence on your choice of cryptos you might want to deal with. Besides, the crypto market is highly volatile, so prices can change every minute. One must be careful with such fluctuations and may need to be advised on when to cash out or to hold his funds.

It is also important to check on the transaction fee each crypto requires. That is really a tricky thing because transaction costs can vary from one cent to thirty dollars for a single transaction. If you don’t want to lose much money on transaction fees, it is better to monitor them.

Another risk is associated with the digital currency exchange. They basically work as non-regulated private companies. You need to consider the risk of placing your funds there. And remember, that you should never use an exchange as a storage for your crypto coins. Crypto trading platform should be used only to when you need to perform a transaction.

Secure Storage

If it is dangerous to store your coins on the exchange, then where should you keep them? There are two options that perfectly serve for this purpose. The first one is a hardware wallet, which is basically a hard drive or USB device. Nevertheless, such wallet has some risks too. They are produced by a non-regulated private company and it is kind of a counter-party risk. Furthermore, hard wallets can be stolen or destroyed.

Another option is a software wallet, which stores digital currency on the hard drive of your computer. Using such a wallet, you can face risks related to simple technical problems, such as electrical, water, or fire damage that can destroy your computer files.